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How Mortgage Amortization Works

Mortgage amortization is the process of eliminating your mortgage debt with regular, fixed schedule payments that gradually chip away at both the interest and principal balance over time. But how exactly does mortgage amortization work?

The Mortgage Amortization Process

To understand how mortgage amortization works, you must first know the difference between paying interest and paying off your loan’s principal balance. A monthly mortgage payment will cover a percentage of both your interest and principal. The interest rate of a mortgage is the fee lenders charge you to take out a loan. Interest is added on top of the principal balance, or the amount that you initially borrowed.

At first, your mortgage payments will go mostly toward your interest and less toward your principal. However, as your loan balance decreases over the months and years, the amount that a lender can charge for interest decreases as well, thus causing the portion of your payment going toward principal to increase. Eventually, toward the final years of your loan, your interest will be just a small part of your monthly payment, and you will notice your balance going down rapidly.

To figure out how much goes to each in a particular month, divide your interest rate by 12 (the number of payments you will make in a year). Then multiply that number by your current balance. For example, if your rate is 6%, divide .06 by 12, which equals .005. If the balance is $200,000, then $200,000 x .005 = $1,000.00. That is the amount of interest you will pay that month.

Why Is Mortgage Amortization Important?

Mortgage amortization is crucial because it helps you figure out several important aspects of your finances. Mortgage amortization allows you to:

Factor how much of each payment goes toward interest and principal
Know how much interest you’re paying
Track your loan balance
Calculate your home equity

By analyzing an amortization schedule, you can discover which mortgage payment strategy works best for you. Understanding your mortgage amortization also helps you plan for the future and take the quickest path toward debt-free home ownership.

Finance Your Home with Butler Mortgage

To navigate the mortgage process, partner with the experts at Butler mortgage. We’ve served first-time and seasoned buyers for three decades in Florida and are excited to now bring our loan solution services to Georgia as well. To secure the best rate that fits your budget, call us at 407-931-3800 or fill out our free online consultation form.

Mortgage Closing Costs: How Much You’ll Pay

The process of buying a home involves many fees and costs. In fact, one of the final steps toward owning a home is paying your closing costs, which are the fees for finalizing a mortgage.

Here’s how much you can expect to pay for closing costs.

How Much Are Closing Costs?

While the total amount will be different for each homebuyer, and each loan program, closing costs will typically range anywhere from 2-6% of your loan amount. For example, if your mortgage is a $200,000 loan, you’ll pay anywhere from $4,000 to $12,000 in closing costs. This is in addition to the down payment you’ll make.

What Is Included in the Closing Costs?

Most closing costs are the responsibility of the buyer, but you can negotiate with your seller to pay some of them as a concession. The most common closing costs sellers are expected to pay include real estate commissions, property taxes, and title insurance. However, homebuyers are generally responsible for paying closing costs such as:

Property taxes
Appraisal fees
Discount points
Escrow account funds (taxes, insurance)
Government recording fees
Loan-origination charges
Mortgage insurance
Survey fees
Credit report fees
Title fees

How Do I Pay Closing Costs?

The most typical method of paying closing costs is to pay out-of-pocket on the settlement (or closing) date. This one-time expense will cover all of the closing costs. In some instances, such as when refinancing your loan at a later date, you can include closing costs into the new mortgage loan.

Calculating Closing Costs

Once you’ve applied for your mortgage, lenders will provide an estimate of closing costs and other fees. They’ll automatically determine the costs for you, so you can review it closely and ask questions. This also gives you the opportunity to negotiate certain fees with your seller and the lender to lower some of the closing costs. Reviewing your loan estimate and working with your lender assures you’re getting the best deal possible.

Important Note About Closing Costs

All mortgage loans have closing costs. Do not fall for misleading “no closing costs” advertising. The costs are there, but they may be hidden, usually in a higher interest rate. What good is saving $10,000 in closing costs if you have to pay an extra $25,000 in interest over the life of the loan? There are times when paying a higher rate to avoid paying some, or all, closing costs is beneficial, but make sure to discuss that situation with an experienced mortgage professional.

Close with Butler Mortgage

Closing on a home can be an exciting time, but it can also be nerve-racking. When financing your home, you’ll want a mortgage lender with expertise and experience to keep the process as uncomplicated as possible. For homebuyers in Florida or Georgia, Butler Mortgage is here to help.

For more than 25 years, our mortgage professionals have helped homeowners find their perfect loan solution. Start your mortgage process today by calling 407-931-3800, or contact us through our free online consultation form.

Why to Get a Home Inspection Report When Buying a Home

Why You Should Get a Home Inspection Report When You Buy a Home — Repairmen, building inspectors, exterminators, engineers, insurance adjusters, or other blue collar workers examine a building/home’s exterior wall and foundation. One wears a red hard hat and clear safety glasses and holds a clipboard. The other checks the foundation with tool.

When buying a home, you’ll need to do your homework to ensure the property you’re purchasing is in its best condition. Here’s why you should get a home inspection report before closing on a home.

What Is a Home Inspection Report?

While a property inspection isn’t mandatory, it is usually recommended after your purchase offer has been accepted. A licensed professional will conduct a thorough walkthrough of the house, looking for issues that could delay your closing date, such as structural issues, leaks, or electrical or wiring problems. The inspector will also be looking for termite damage, roof damage, or any other problems caused by the elements.

Benefits of a Property Inspection

The biggest benefit of conducting a home inspection report is discovering and addressing any large problems with your prospective home before you buy it. A thorough home inspection report will allow you to determine if the property has any underlying issues that the seller should address.

After the inspection, you can sit down with the seller to discuss these issues and determine who will pay for repairs prior to your purchase. This allows you to be proactive in fixing up your property and will save you time and money in the long run by correcting issues before they get worse.

Your seller may be willing to pay for more of the required repairs, or they may even be willing to negotiate for a lower purchase price.

How Home Inspections Affect Mortgages

Knowing your property issues in advance can also save you time and money throughout the mortgage process. If your property has multiple problems, it can make getting a mortgage more difficult. This could result in a larger down payment, a smaller loan, or even a rejected mortgage. By getting a home inspection report before you apply for your mortgage, you can fix any growing problems and receive the best possible mortgage for the home of your dreams.

Get the Right Mortgage with Butler Mortgage

To navigate the mortgage process and get the best possible rate, finance with Butler Mortgage. We’ve worked with first-time and experienced buyers in Florida for more than 25 years, and we’re proud to expand our professional services into Georgia.

Find your loan solution today by calling 407-931-3800 or filling out our free consultation form online.

How to Take Cash Out of Your Home

Equity occurs when your home’s value is greater than the amount left on your mortgage. When you access your equity, you take cash out of your home that you’ve worked hard to build so this should only be done for important reasons. This money can be used for a variety of purposes, such as helping you invest in your home’s future, through home improvement projects.

Here are a few ways to take cash out of your home.

Cash-Out Refinance

Refinancing your home is an easy way to take cash out. When you refinance, the new mortgage will be greater than your current mortgage balance, but you’ll get to keep the difference, after paying closing costs. The best time to employ this method is when you can also reduce your interest rate. In some cases, you may increase your balance, but the monthly payment actually goes down due to a lower rate. When rates are higher than your current rate, this option is not as advisable.

Home Equity Loan

If you don’t want to mess with your current mortgage, you can take out a home equity loan or a home equity line of credit (HELOC). Each of these is a second mortgage taken out on your home that allows you to access equity. Once a home equity loan closes, you’ll receive the payout. When a HELOC closes, you can access it whenever you want, making this a great option for someone who isn’t quite sure when the money will be needed. Home equity loans can be a fixed or adjustable rate loan and usually has a shorter term than a traditional mortgage. It allows you to access exactly what you want without refinancing, and it has substantially lower closing costs.

Reverse Mortgage

If your mortgage is paid off or has a low balance, a reverse mortgage might be right for you. You access your home equity by receiving a lump sum or electing to receive a set amount every month. It is exactly as the name implies… reverse. The lender pays you! You won’t have to ever make a monthly payment. The mortgage balance will increase over time, and it’ll be paid off when the property is sold or refinanced. For seniors, it can be a smart way to take out cash while continuing to own, and stay in your home.

Finance Your Home with Butler Mortgage

Butler Mortgage is here to help get you in a home so you can start building equity. For more than 25 years, we’ve been helping home buyers in Florida, and now Georgia, find the right loan solution and secure rates that fit their needs. Get started today by calling 407-931-3800 or filling out our free consultation form online.

How to Get Rid of PMI

If you secured your mortgage through a conventional loan, there is a chance you added private mortgage insurance, also known as PMI. PMI may protect your loan, but it can also cost you hundreds of dollars each month. Here is some information about PMI and ways you can save money by dropping it from your mortgage.

What Is PMI?

Private mortgage insurance protects your lender in case you default on your loan or go through foreclosure. PMI is usually required if you have a conventional loan and make a down payment of less than 20%, or if you refinance and your equity is less than 20% of your home’s value. The only benefit that you get from PMI is the ability to make a smaller down payment.

How Much Does PMI Cost?

PMI depends on a variety of factors, just like your mortgage. The smaller your down payment is, the higher your PMI will be to cover your risk factor. A low credit score can also raise PMI since those with lower scores are more likely to default. However, fixed-rate loans will have lower PMI because they’re more predictable. Regardless of how high or low it is, your PMI can still be a few hundred dollars a month.

Ways to Get Rid of PMI

If you’re purchasing your home or refinancing, there’s a clear path to get rid of PMI. The first step is to build equity. You can’t cancel your PMI until your home equity reaches 20%. You can, however, raise your home equity by making loan payments. The second step is time. Most lenders require that you make 24 payments before being eligible to remove PMI, although some lenders allow removal after only 12 on-time payments. Once you’ve reached that 20% threshold and you have reached the required time threshold, contact your lender to get rid of PMI.

For those refinancing their home, 20% home equity must still be reached to get rid of PMI. But after applying for your refinance and clearing all your paperwork, your new loan won’t include PMI.

Contact Your Florida and Georgia Mortgage Experts

Whether you’re a first-time or experienced buyer or looking to own a home or refinance, secure your home loan through Butler Mortgage. We’ve worked with potential homeowners throughout the states of Florida and Georgia for more than 25 years. We are ready to help find the best loan solution for you. Call us today at 407-931-3800 to schedule an appointment or fill out our free consultation form online.

Should You Rent or Buy a Home?

Moving into a new home is a major life decision that requires much thought and research. When deciding whether to rent or buy a home, you should consider where you want to be in the next 5-10 years. If you just need temporary housing, perhaps renting is your best option. However, owning a home is an investment that can reward you in the long run.

Here are some pros and cons of renting and buying a home.

The Benefits of Renting a Home

The biggest benefit of renting is your lower overall commitment to the property, both personally and financially. Since you are a tenant and not the owner, the responsibility of handling maintenance issues that often burden homeowners will fall on your landlord or property management company, unless specified otherwise in your rental agreement.

There also aren’t any expensive closing costs to deal with. You simply agree to pay a set price for rent each month as well as an upfront deposit to cover any damages — usually in the form of first and last month’s rent. Renting also gives you the freedom to move around and “test-drive” a location or style of home before deciding to buy.

The Drawbacks of Renting a Home

Regardless of the freedom that renting offers, there are several downsides to renting a home. The biggest drawback to renting is instability. While your rent shouldn’t change throughout the year, there’s a strong chance it will increase when it’s time to renew your lease. Such uncertainty and upheaval can be stressful as rental rates and cost-of-living go up. Furthermore, many view renting a home as throwing money away. As a tenant, you’ll live in the home but will be unable to build equity. Therefore, your monthly rent is passive income for the property owner.

Before committing to a rental agreement, make sure you know what maintenance services are included, what you are allowed to do to the property, and what you’ll need to pay for out-of-pocket. Renters are often not able to make any home renovations; you get to live in the property as is. And if you paint or redecorate, you’ll likely have to change it back before you move out.

While renting can be a good temporary solution, buying a home can help you settle down and create a permanent living space.

The Benefits of Buying a Home

Buying a home does require a higher overall cost and more responsibilities than rentals; however, it is an investment in your future — and quite possibly the best investment you can make. You can receive tax deductions for the interest and property tax portions of your mortgage payments, and as you pay your mortgage and complete home improvement projects, your home’s equity and value will increase. You’ll also have unlimited freedom to decorate your house’s interior to make it feel more like home.

With monthly rental costs increasing, it makes more sense to invest your money in a home. By working with a mortgage professional to find an affordable rate, you can possibly become a homeowner for around the same amount that you would be paying for rent each month.

Find Out Your Home Buying Options at Butler Mortgage

For over 25 years, Butler Mortgage has worked with both first-time and seasoned buyers wanting to own a home in Florida or Georgia. Let us help you find the right loan solution for you by calling 407-931-3800 or by filling out our free consultation form online.

4 Practical Reasons to Use Home Equity

Home equity is technically the amount of your mortgage that you’ve paid off. Your home’s worth is weighed against what you still owe, so as your home’s value increases and your mortgage sum decreases over time, your home equity will grow.

If your financial situation needs assistance, your home equity can be tapped into to provide a low-cost and convenient way to pay for major life milestones.

Ways to Use Home Equity

With few limitations, home equity loans are an easy and safe way to receive a large cash sum to help pay for various expenses.

Here are a few common reasons why homeowners tap into their home equity.

College Loans – Using your home equity may be a better option than taking out traditional student loans. In some cases, mortgage interest rates are lower than student loan rates. Student loans may also have a shorter term, making it harder to pay back. A home equity loan is a great way to receive a low-cost loan with plenty of time to repay.

Debt Consolidation – While it isn’t always advisable to turn short term debt into long term debt, there are times when simplifying credit card bills, student loans, car loans, and other debt into one payment makes sense. Credit cards can carry extremely high interest rates, making repayment of large balances rather difficult. Consolidation creates breathing room for the borrower, but is only successful if the borrower changes their spending habits to avoid getting into serious debt all over again.

Emergencies – Nothing adds a financial strain more than a medical or family emergency. Sudden unemployment or injury can cost you a significant amount of money in a short amount of time. Home equity loans are a good short-term solution to temporary financial distress.

Home Improvements – One of the most common reasons to use home equity, home improvements are a wise way to invest your equity as it can feed back into your home’s equity by increasing your property value.

There are a myriad of other reasons to obtain a home equity loan, such as buying a car, paying for a daughter’s wedding, or financing another home. However, it would be advisable to discuss your reasons for using your home’s equity with a qualified mortgage loan professional before starting that process.

Secure a Home and Build Equity with Butler Mortgage

How to Get a Mortgage with Student Loans

Once out of college and starting a career, adults often start looking for a place to settle down. However, they may encounter difficulty qualifying for a home loan if they have excessive student loan debt. If you are in a similar situation, here is what you can do to increase your chances for approval and get a mortgage with student loans.

What Do Lenders Look For?

Mortgage lenders start by looking at your credit score, which may not even be affected by student loans. To boost your credit score, make sure you pay your bills on time and don’t over-spend. Manage your credit wisely, and use more than one type. Having a credit card and student loans shows you’re capable of handling finances. During the mortgage process, keep old credit accounts open, especially ones in good standing.

The Effects of Your Debt-to-Income Ratio

After your credit score and income have been assessed, lenders will calculate your debt-to-income ratio, or DTI. This is where student loans can impact your standing. Your DTI shows the percentage of your monthly income that goes toward paying debts. Your monthly recurring payments, such as credit cards, rent, and student loans, are divided by your pre-taxed monthly income to get your percentage.

The higher your DTI, the harder it’ll be to get a mortgage. Most lenders will work with clients who have a DTI of 50% or lower, depending on what type of loan you take out. Paying off your student loans or other debts can help lower a high DTI ratio and qualify you for more loan programs.

Qualifying for a Mortgage with Student Loans

If you have solid, reliable income and make consistent payments, it’s possible to qualify for a mortgage before paying off your student loans — even if your DTI is over 50%. Loans backed by the Federal Housing Administration will take a DTI of up to 57%, in some cases. Veterans and active duty personnel can also qualify for a VA loan that can be even more flexible with your DTI ratio.

Get a Mortgage with Butler Mortgage

No matter your budgetary means, Butler Mortgage is here to help you navigate the mortgage process. For more than 25 years, we’ve worked with potential homeowners throughout the states of Florida and Georgia to find their perfect loan solution. Get started today by calling 407-931-3800 or filling out our free online consultation form.

What Rising Interest Rates Mean for You

Inflation affects everyone, and first-time homeowners are feeling the effects of rising costs and interest rates — especially when it comes to financing a home. Here’s why the interest rate is rising and what it means for new homebuyers like you.

Why Are Interest Rates Rising?

The Federal Reserve, or “Fed” as they are known, indirectly determines interest rates by managing the nation’s money supply. This “tinkering” is their main tool in fighting inflation. When inflation rates are high, the Fed typically decides to increase interest rates, which, as the theory goes, will slow down spending and bring the economy back to normal. The opposite happens when inflation is low — interest rates are lowered to increase spending. The interest rate has increased four times in 2022, and it’s predicted that it may happen again at the Fed’s next meeting. While rising interest helps fight inflation, it certainly doesn’t help mortgage rates.

How Do Rising Interest Rates Affect My Mortgage?

Your mortgage may not be directly tied to the national key interest rate, but it’s certainly influenced by it. Mortgage rates have been rising, with monthly payments skyrocketing over the Spring and Summer of 2022. Since rates are increasing, home ownership is decreasing. Many people can’t afford such a drastic change in their mortgage rate; therefore, mortgage applications have decreased in the past year.

What Can I Do?

The best plan for first-time homeowners looking to secure a steady mortgage is to meet with a mortgage provider and determine the most suitable loan program for your situation as quickly as possible. You may find that the higher interest rate is not as prohibitive as you thought, especially when comparing a mortgage payment to the skyrocketing rents that are also plaguing most of the country. There are still numerous benefits to buying a home now and you can always refinance the high rate into a lower one when the economy improves. Plus, you will be locking in a payment as well as the value of a home since home prices, while levelling off in recent months, are surely to keep rising each year.

Secure the Best Rate with Butler Mortgage

Whether you’re a first-time buyer looking for a solid mortgage rate or a homeowner wanting to refinance, consider financing your home through Butler Mortgage. For more than 25 years, we’ve worked with all types of buyers looking to own a home in the Central Florida area. Let us help you find the right loan solution for you by calling 407-931-3800 or by filling out our free consultation form online.

What Is Escrow and Escrow Analysis?

When working to secure a mortgage, you’ll likely hear the terms “escrow” and “escrow analysis.” Depending on your mortgage, you may have to create an escrow account and fund it with your monthly payment to ensure your property taxes are paid and insurance is maintained. Each year, your escrow will need to be monitored through an escrow analysis to determine its accuracy.

Here is what you need to know about your escrow and escrow analysis.

What Is an Escrow Account?

An escrow account is essentially a savings account for insurance and taxes. It’s a financial account held by a third party, usually your mortgage provider. The purpose of an escrow account is to pay for obligations of a purchase agreement. Your account balance is determined by property taxes and various insurance policies which are divided into a monthly amount that will go directly to your escrow.

What Is an Escrow Analysis?

Insurance and tax rates never stay the same. To ensure your escrow amount is correct, a mortgage lender conducts an annual escrow analysis. This analysis looks at payments made to the account and determines if there is a surplus or a shortage.

If you have a surplus in your account, the money will be returned to you. If there’s a shortage, however, you’ll have to make up the difference either in a one-time payment or via higher payments over time.

Your lender will also look to see if your monthly escrow payment needs to be adjusted.

How an Escrow Account Benefits You

An escrow account and analysis equally divide your property taxes and insurance, so you aren’t paying a huge bill each year. Escrow ensures your payments are on time, and a yearly analysis makes sure you’re only paying exactly what you owe.

Ultimately, an escrow account takes the pressure of paying insurance fees and property taxes off your mind, so you can enjoy being a homeowner.

Work with the Professionals at Butler Mortgage

If you’re looking to secure a mortgage in Central Florida, consider financing with Butler Mortgage. We’ve worked with both first-time and seasoned buyers looking for their dream home for more than 25 years. Let us help you find the right loan solution for you by calling 407-931-3800 or by filling out our free consultation form online.